Forty years ago, Genentech developed a process for manufacturing antibodies that proved lucrative for the company as many biopharma firms lined up to license the technology. Referred to as the “Cabilly patents” and named for scientist Shmuel Cabilly, the technology allowed Genentech—and later its parent company Roche—to erect a toll booth of sorts that generated royalty payments of an estimated $1 billion annually.
In 2018, those patents finally expired, but Roche is still trying to collect the last bit of royalties that the company believes are due.
On Tuesday, Roche filed suit against Biogen, claiming that it is owed royalties on sales of Biogen’s multiple sclerosis blockbuster Tysabri.
In federal court in the Northern District of California, Roche filed the breach of contract claim and demanded a jury trial, saying that Biogen has not paid royalties on its Tysabri since the end of 2018.
Biogen started paying fees when was Tysabri in 2004. The agreement, according to court documents, was for Biogen to pay a mid- to single-digit percentage on sales in the U.S. and a “lower royalty” on Tysabri sales in the rest of the world. Payments were made on a quarterly basis. Biogen made its final royalty payment covering the fourth quarter of 2018 in March of the following year.
But Roche claims that Biogen manufactured Tysabri and stockpiled it—as is standard practice in the industry. Roche says that it is due royalties on Tysabri that was stockpiled prior to Cabilly’s expiration even though those Tysabri sales came after 2018.
“Because the process for manufacturing antibodies is complex, and the consequences of a stockout potentially catastrophic, it is customary for biopharmaceutical firms that make and sell therapeutic antibodies to stockpile at least several calendar quarters worth of product, and often more than that,” Roche wrote in the complaint.
Tysabri is one of Biogen’s most lucrative products, having generated more than $2 billion each of the last two years. During the period in question (2019-2022), drug revenues totaled $7.9 billion.
The lawsuit raises questions about other companies that had similar licensing agreements with Roche and may have stopped making royalty payments after sales in 2018.
“Given that the litigation is ongoing we are not commenting further on the case, other than that we remain confident in the enforceability of the Cabilly patents,” Genentech said in a statement.
Biogen did not respond to a request for comment.
The squabble has not prevented Roche and Biogen from doing business. Less than three months ago, Roche agreed to pay royalties to Biogen on the potential commercialization of a late-stage bispecific antibody, glofitamab, which is being investigated for use against blood cancers including B-cell non-Hodgkin’s lymphoma.